Retirement Truths You Should Know

shutterstock_150062198Retirement is not the same today as it was in the old days. For most people today, the ideal retirement is one where retirees can enjoy life more in their twilight years, no longer worrying about work or income to get by. The ideal retirement today requires a substantial retirement fund to take care of the day-to-day expenses and other needs of the retiree. That is why it is important to prepare and save up for retirement early.

As the perception of retirement changes, so do some of the usual truths. What may apply in the previous years may not really apply to the future retirees. Here are some important retirement truths that you should know.

Average life span is increasing.

Thanks to advancements in science as well as technology, the average life span of humans has generally increased. People are living longer than they previously do. This has an effect on retirees in the future. The next retirees may expect living around a decade or two more after they retire. If you think about it, this will mean added years that retirees may need to address in terms of financial needs. This means future retirees may need to prepare and save up for their retirement with a larger retirement fund as previously expected. It changes how people will eventually picture how their retirement life will be.

Pension plans are becoming rare.

Another possible consequence of retirees having a longer life span is the decreasing number of pension plans. Pension plans are designed to help provide added income for people once they retire. Most pension plans were designed to provide the needs of retirees for a certain number of years. But with increasing life spans, these pension plans still need to provide the same amount for every additional year. This leads to pension plans having their funds eaten up more the longer their plan holders live.

Earnings from the capital investments cannot cope up with the increasing number of retiree pensions companies need to put out. Over time, these pension plans may end up becoming insolvent. Because of this, only a fraction of pension plans remains available for people as compared to the previous decades. Most of them even now cease to get new employees to join in just to stay afloat for their current plan holders, making their availability even rarer. This will indicate that people need to find other alternatives to pension plans.

Home equity is becoming unreliable.

It was only a few decades ago that most people consider home equity as one of the more secure investments out there for retirement. It usually occupies a huge percentage of assets set aside for retirement. But the housing crisis several years ago has led to falling property prices that have eaten up quite a chunk of home equities all over the country. Because of this, home equity is no longer considered as secure today as they were in the past. People may need to rethink trying to consider home equity as a sizable chunk of their retirement plans as it may work against them as real estate still remains volatile and unpredictable.

Social Security is not stable.

An increasing senior population has led to Social Security suffering through a strain of making payments to its increasing crop of retirees. Social Security is now handing pension payments off more retirees. The amount they give out is more than what Social Security is taking in the form of payroll taxes. If not corrected over time, this can lead to a collapse in the system. The current predicament in Social Security can be alleviated by either reducing the benefits or increasing the payroll taxes.

Faced with these changes, people need to rethink how they may need to prepare for their retirement. They need to find other alternatives for addressing the not-so-good outlook of previous retirement fund mainstays. Having a more updated mindset and with these new retirement truths will help more and more people prepare better for their own retirement. The earlier that people know about this, the better they will be able to address the changes.

 

Posted by Ardent Editor on Dec 6 2013 in Retirement 101 Tags: , ,

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